Legal & Regulatory

Resident Director Requirement Goes Into Effect Under Updated Companies Act

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DELHI – Subsidiaries of foreign companies in India will be required to have at least on resident director on its board by 1st April, 2015, in accordance with the updated Companies Act 2013.

Section 149(3) of the Companies Act 2013 is as follows:

“Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.”

Effective April 1, 2014, foreign companies are given one year to comply with the new rule. The first compliance year will be calculated from April 1, 2014 to December 31, 2014. The requirement will thus be pro-rated to at least 136 days of residence in the country for the first year, according to General Circular No. 25/2014 released by the Ministry of Corporate Affairs.

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Securities and Exchange Board of India Granted More Powers to Protect Investors

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DELHI – On Tuesday, the Securities Laws (Amendment) Bill 2014 was passed by the Rajya Sabha, India’s upper house, after being passed by the Lok Sabha, the lower house, last week.

The bill is intended to give the country’s capital market regulator, the Securities and Exchange Board of India (SEBI), the power needed to crack down on fraudulent investment schemes and insider trading.

The Asian giant has recently been seeing a growing number of multi-level market schemes (effectively Ponzi schemes) disguised as Collective Investment Schemes (CIS).

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Indian Regulator Approves REITs to Streamline FDI into Burgeoning Property Market

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DELHI – On Sunday, India’s capital market regulator, The Securities & Exchange Board of India (SEBI), in a long-awaited announcement, revealed the guidelines for real estate investment trusts (REITs), as well as infrastructure investment trusts (InvITs).

The listed entities will function similarly to mutual funds, allowing developers to raise resources from investors that can be directly invested into realty and infrastructure projects.

“If somebody creates a Special Project Vehicle (SPV) and has made an investment in a real estate project, units of that will be used to form the REIT and that Trust will issue shares” explains U K Shinha, SEBI Chairman.

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India Makes Plans to Adopt International Industrial Coding System to Attract FDI

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DELHI – The Indian government plans to adopt the international industrial coding system to simplify and clarify policy and economic information for foreign investors as part of its plan to overhaul foreign direct investment policy under Modi’s administration.

By replacing the current National Industrial Classification (NIC) 1987 system with the 2008 system, economic data and policy can be synchronized with international standards, making FDI policy easier to navigate for foreign investors.

The move is in line with the Modi administration’s plan to simplify business processes and improve the ease of doing business in India to boost foreign investment. India is currently ranked at 134th place out of 189 global economies, according to the latest World Bank report.

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Cabinet Approves Changes to Manufacturing Labor Laws in India

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DELHI – In a landmark decision last month, India’s Union Cabinet approved a proposal to amend three key labor laws including the Factories Act 1948, Apprentices Act 1961 and Labor Laws Act 1988.

While successive Indian governments have agreed on the need for comprehensive labor reform, partisan politics and the potential for a union-led backlash have historically stalled policy progress.

However, with Narendra Modi and the BJP now in control of the first majority government in 30 years, many foreign investors are hopeful these proposed amendments may signal the beginning of the first major revamp in nearly five decades of India’s outdated labor laws – a development that could create millions of new jobs and boost the country’s manufacturing competitiveness.

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DIPP to Process All Single-Brand Retail Proposals Within 90 Days

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The Department of Industrial Policy and Promotion (DIPP) has set a 90 day maximum time frame to process all outstanding FDI proposals in single-brand retail.

Under fire for delaying 13 applications to open single-brand retail outlets from several major foreign retailers including Forever 21, Furla and Swarovski, the DIPP is now attempting to fast-track its approval process to avoid further criticism.

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Political Contributions in India: A Guide for Foreign Companies

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DELHI – While laws governing political contributions in the United States and Europe are relatively straightforward, restrictions in India are slightly more complex and effectively prohibit political parties and candidates from accepting contributions from foreign individuals and firms.

Initially governed by the Foreign Contribution Regulation Act, 1976 and Prevention of Money Laundering Act, 2002, foreign political contributions are now principally governed by the Foreign Contribution Regulation Act, 2010 (FCRA 2010).

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India Mulls Scrapping 30 Percent Domestic Sourcing Requirement

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DELHI – India’s Department of Industrial Policy and Promotion (DIPP) is reportedly considering scrapping the 30 percent domestic sourcing requirement in single-brand retail.

According to India’s Ministry of External Affairs, the move could yield higher foreign investment (FDI) inflows by allowing high-end and high-tech brands to enter the Indian market without being required to source goods locally.

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Asia Briefing Bookstore Catalogue 2013 Dezan Shira & Associates
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